Why do I need signatures to cash an Insurance check?

Q: My mom had filed a claim and the insurance company sent a check made out to her, the adjuster, and the mortgage company. She was informed that each of the three entities had to endorse the check before she could cash it. Is this normal? Also, after she and the adjuster endorsed the check she mailed it to the mortgage company (in Illinois)and now the mortgage company does not want to mail the check back. They are insisting she provides them with contractor quotes for the work to be done. They are now telling my mother they will send the balance in small payments. Do they have the right? What can I do?

A: With regard to your first question, it is common practice for insurance companies to issue settlement payments to all interested parties. Since your mother has a mortgage on her home and she hired a public adjuster to handle her claim, all three parties are usually named on all settlement checks. Usually, the public adjuster will endorse the check, get it signature guaranteed at their bank, and return it to the policyholder for them to endorse and forward to the mortgage company. Here at Maximum Insurance Adjusters, our clients have encountered several scenarios that seem to typify general mortgage company standards with relating to insurance company settlement checks. Typically, a homeowner in good standing with his/her mortgage company and little to no history of delinquent payments, will have the full amount of their settlement check released to them by their mortgage company, as long as the settlement check is for less than $20,000. A settlement check for a sum larger than $20,000 is often held by the mortgage company until a licensed contractor’s or roofer’s signed contract is presented to them. At that point they frequently either release the full amount or issue a check for 1/3 of the contractor’s or roofer’s contracted amount for the repairs. The money for the repairs is often dispersed in thirds as the work is performed until the entire contracted sum is released and all the work is completed. Frequently the mortgage company will require an inspection of the work being done before they are willing to release the remaining thirds. These inspections are often associated with a fee to the homeowner that is usually deducted from the insurance settlement. Homeowners that are not in good standing with their mortgage company frequently have slightly different scenarios with their mortgage company. Once the settlement check is sent to the mortgage company with both the public adjuster’s and homeowner’s endorsement, the mortgage company usually holds all the money until a licensed contractor or roofer is retained. At Maximum Insurance Adjusters we’ve seen the mortgage company hold rather small settlement check amounts. One client of ours decided she was so angry about them holding her money until she hired a licensed contractor, that she resolved not to pay her mortgage company anymore payments until they released all of her money. As you can imagine, the mortgage company was not amused, and neither was the client. Now, two years later, the client’s home is being foreclosed and she has yet to see a penny out of the insurance money. The mortgage company is getting the house and the insurance money, while the client and Maximum Insurance Adjusters are still waiting to be paid. However, most homeowners hire a licensed and insured contractor or roofer and submit the signed contract for the repairs. The mortgage company will often disperse the money in the same manner as mentioned before regarding larger sized settlement checks. The best advice we can give you, based on our past experiences, and the situation you presented, is to be as diligent as possible about providing the necessary paperwork and information to the mortgage company. This can help speed up the release of your mother’s insurance settlement money from her mortgage company. Mortgage companies usually request: a licensed and insured roofer or contractor, a signed contract with that roofer or contractor, and a W-9 form from the roofer or contractor. It is extremely important to use a licensed and insured contractor or roofer when doing repairs. At Maximum Insurance Adjusters we are constantly stressing this to our clients. Countless clients have told us horror stories about unlicensed uninsured contractors and roofers, and unfortunately there is little to do about it. Ensuring that your roofer or contractor has a valid license and current liability insurance, and the ability to verify it, can protect you in the long run. Once all of your mother’s home repairs are completed, the mortgage company should release all unused monies from the insurance settlement check(s). If you have any additional questions, please feel free to contact us. At Maximum Insurance Adjusters we are always happy to help.